EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
How EY can help
The current state of A&D supply chains
OEMs are facing a heady mix of labor shortages, supply chain issues and high prices of raw materials, all signaling a potential threat to component availability.
Within supply chains, the impact of the war in Ukraine has been limited. Although commercial OEMs have relied heavily on Russian titanium, they likely have enough supply to meet near-term needs, as they have been stockpiling reserves and building alternative sourcing strategies for some years now. A larger disruptive source remains in the market: distressed suppliers on uncertain footing since the pandemic began and still confronting uncertainty in demand.
To help distressed suppliers navigate near-term cash flow pressures, OEMs have offered financial aid, accelerated payments and set up “watchtowers” to detect financial problems. Governments have offered billions in grants, loans and guarantees as well, and Tier 1 suppliers have chipped in with contract extensions, inventory purchases and vendor financing programs. Even so, the smaller suppliers facing maximum pressure have been consolidating on a large scale.
Recommended actions: To maintain the long-term viability of their supply chains, major A&D companies have to continue to proactively identify distress and perform proactive evaluations. OEMs may need to acquire major suppliers and insource to protect jobs and increase capacity utilization, as well as invest in strategic technologies.
Workforce challenges
Meanwhile, the pandemic has scrambled the availability of labor and created new priorities among workforces, resulting in a drift away from traditional manufacturing roles. In the EY 2021 A&D Workforce Study (via EY.com US), EY teams found that flexibility reigns supreme today, as it has been shown to be both possible and preferable. In the US, about 26% of the A&D workforce is over age 55 (higher than the average across industries), and voluntary attrition rates are above average as well. Manufacturers should expect a wave of retirements amid the “great resignation.” Meanwhile, digital and analytical talent — core to how the sector drives innovation and achieves next-generation operations — is more necessary than ever.
Recommended actions: To the extent possible, invest in enabling technology for remote work, which aligns with flexibility and greater safety, and make accommodations for flexible work arrangements (such as the start and finish times and compressed workweeks).
Also, explore the top three differentiated benefits, as cited in EY workplace survey: recognition, career development opportunities and tuition reimbursement. The second perk can be tied to upskilling, into the much-needed areas of engineering, cybersecurity and digital. Specify needed skills and partner with universities whose curriculums produce qualified candidates and augment your talent pipeline through institutions conducting research in areas of interest.